Alpen Bank: Launching the credit card in Romania
Name: Xiao Zheng #701369253
Subject: Alpen Bank: Launching the credit card in Romania
Course Number: IB207
Instructor: James Neelankavil, PH.D.
In 2006, the country manager for Alpen Bank in Romania, Gregory Carle, considers whether to recommend the launch of a credit card business and add 5 million of annual profit to the Consumer Bank segment within two years. The firm rejected the idea several years earlier because of poor economic conditions in Romania. However, Romania is experiencing a period of economic growth after joining the European Union and Carle believes it is time to reconsider the opportunity despite continued skepticism within the company. Carle faces several important decisions before he can present his plan to the head of International Consumer Businesses. He must decide whether to launch a credit card business in Romania, how to position the credit card, and how to acquire new customers most effectively. Historically, Alpen management had balked at launching a card business due to low per-capita income levels, a poorly developed infrastructure of point-of –sale terminals, and the population’s inexperience with consumer credit. The country’s imminent entry into the European Union had led to a reassessment of this decision. Hence it is critical to consider whether Alpen Bank should approve the proposal of Carle’s, which is whether to launch the credit card business in Romania market. Meanwhile, Carle should consider the case rest on the analysis of the economic opportunity and demonstrate the generating 5 million in profit within two years was a realistic objective. Beyond this, we should also identify why Alpen bank would raise this consideration. And the statements are as follows. Firstly, after a tough three-year recession, macroeconomic trends during the first half of the decade were encouraging. Rapid economic growth and rising incomes, particularly among the emerging middle and upper-middle class, had dramatically increased total disposable income. And a consumer behavior research also showed that consumers in Romania were likely to purchase branded imports, it is a good sign for Alpen Bank to see that the utilization rate of the credit card would be high enough to earn the profit that Alpen has expected. Secondly, consumer behavior in Romania has changed; they used to prefer to spend their spending largely cash-based. However, consumers were also increasingly likely to use cards instead of cash, so it is a great timing for Alpen Bank to launch their new business. Following questions are also need to be answered as to solve the primary problem. The first one is which level of customer should Alpen Bank position its credit card business. It is important to decide Alpen Bank’s target customer, middle-class customers or affluent customer, if the credit card positioning did wrong, the expected result which is 5 more million profit within two years won’t turn up, or even create more losses for Alpen Bank. Other problem also can be listed. Such as what level of customer acquisition would be required to break-even, and how quickly would the business generate profit beyond break-even? How would the credit card opportunity compare to focusing on the core business of banking services for the affluent?
In this part, Alpen Bank’s internal strengths and weakness need to be considered to decide whether to launch the credit card business. We can use the SWOT analysis to state Alpen’s situation. Which are stated as following. Strengths
Strengths are characteristics of the business or team that give it an advantage over others in the industry. 1. Alpen Bank’s existing customer base was affluent and was likely an easier segment to target. These potential customers were the most attractive for credit card issuers. 2. Affluent customers were less price-...